Tp Icap Group Plc · LSE:TCAP
Tp Icap — H1 2019 Earnings Presentation
36 slides from Tp Icap's earnings presentation, Aug 6, 2019
Slide 1: TP ICAP plc Interim Results
TP ICAP plc Interim Results For the six months ended 30 June 2019
Slide 2: Disclaimer
Disclaimer This communication and all information contained in or attached to it (including, but not limited to market prices/levels and market commentary) (the "Information") is for informational purposes only, is confidential, may be legally privileged and is the intellectual property of one of th
Slide 3: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Interim Results for the six months ended 30 June 2019 | 6 August 2019 3
Slide 4: Agenda
Agenda Introduction Nicolas Breteau Key financials Robin Stewart Business division update Nicolas Breteau TP ICAP plc Interim Results for the six months ended 30 June 2019 | 6 August 2019 4
Slide 5: H1 2019 Financial highlights
H1 2019 Financial highlights • Revenue £922m Revenues (H1 2018: £937m*) 937 922 • Underlying Operating profit £158m** 891.5 (H1 2018: £155m) 803.7 • Underlying Operating margin 17.1%** (H1 2018: 17.0%) • Underlying Profit before tax £134m** H1 2019 H1 2018 (H1 2018: £139m) Operating Profit • Basic U
Slide 6: Laying the foundations
Laying the foundations • We are now in the last six months of integration • This work will create an organisation that is agile, efficient and more responsive to client needs • Immediate priorities: – Establish a strong management team – Finalise the integration – Create risk framework appropriate f
Slide 7: Immediate priorities: Strengthen Management and Governance
Immediate priorities Strengthen Management and Governance • Strengthening next layer of management now that the new senior leadership team is in place • Responsibility for revenue generation lies solely with global business divisions • New regional CEOs responsible for local regulator relationships,
Slide 8: Immediate priorities: Integration and Belfast
Immediate priorities Integration and Belfast • On course for £75m of run-rate synergies by the end of 2019 in line with guidance • Reducing the number of premises we operate from • Continuing to move support functions to our Belfast shared service centre • On track to decommissioning 32 of 78 core I
Slide 9: Immediate priorities: Risk management framework
Immediate priorities Risk management framework • Full review of TP ICAP’s risk framework started last year; expect to complete implementation of new framework by end of 2019 • Framework is essential for the discharging of responsibilities when the Senior Managers and Certification Regime comes into
Slide 10: Immediate priorities: Brexit
Immediate priorities Brexit • 90% of our broking revenues are largely unaffected by Brexit • Business we do in the EU for EU clients – Created new company, TP ICAP Europe, with European branches incorporated to protect business in the event of a Hard Brexit – EU venues have received regulatory autho
Slide 11: Robin Stewart, Chief Financial Officer
Robin Stewart Chief Financial Officer TP ICAP plc Interim Results for the six months ended 30 June 2019 | 6 August 2019 11
Slide 12: H1 2019 income statement
H1 2019 income statement £m (2018 at reported exchange rates) H1 2019* H1 2018 Revenue 922 910 Underlying Operating profit 158 155 Underlying Operating profit margin 17.1% 17.0% Finance income 3 2 Finance costs (27) (18) Underlying Profit before tax 134 139 Tax (33) (36) Effective tax rate 25% 26% S
Slide 13: Impact of IFRS 16 on the income statement
Impact of IFRS 16 on the income statement H1 2019 H1 2019 £m (2018 at reported exchange rates) Pre-IFRS 16 IFRS 16 Reported H1 2018 Change Revenue 922 - 922 910 +1% Net administrative expenses (767) 3 (764) (755) -1% Underlying operating profit 155 3 158 155 +2% Underlying operating profit margin 16
Slide 14: H1 2019 Financial Performance
H1 2019 Financial Performance Revenue by Global Broking Revenue Revenue by Region Business Division by product £64m £50m £23m -14% £124m +12% +28% -2% £458m £102m -3% £187m -9% +8% £108m £340m -6% £288m -0% £648m -2% -6% £100m -8% Global Broking Rates EMEA Energy & Commodities FX & Money Markets Ame
Slide 15: Update on Integration
Update on Integration • Integration on track to deliver £75m of savings by end of 2019 • At H1 2019 a run-rate £74m has been delivered • £20m spent on Integration in H1 2019 and expect to incur further costs of c. £10m in H2 2019 in line with guidance TP ICAP plc Interim Results for the six months e
Slide 16: Administrative expenses
Administrative expenses £m (2018 at constant exchange rates) H1 2019 H1 2018 Change Change Broker compensation 451 454 (3) -1% Other front office costs 88 93 (5) -5% Total front office cost 539 547 (8) -1% Support Staff Costs 117 123 (6) -5% Third Party Technology 27 28 (1) -4% Premises 26 27 (1) -4
Slide 17: Administrative expenses: breakdown of cost movements
Administrative expenses Breakdown of cost movements: H1 2018 vs H1 2019 £m 22 780 6 3 8 4 7 3 771 758 2018 Translational 2018 Synergy Net Costs Broker New Planned IFRS 2019 Reported FX Constant Savings* Reductions Comp Investments Increases 16 Currency *£74m of total synergy savings recognised to da
Slide 18: Contribution
Contribution £m (2018 at constant exchange rates) H1 2019 H1 2018 Change Change Total Broking contribution Revenue 858 880 (22) -3% Total front office costs (539) (547) 8 +1% Contribution 319 333 (14) -4% Contribution margin (%) 37.2% 37.8% -0.6% pts Data & Analytics contribution Revenue 64 57 7 +12
Slide 19: Underlying operating profit and margin by region
Underlying operating profit and margin by region Underlying operating profit Margin £m (at reported exchange rates) H1 2019 H1 2018 Change H1 2019 H1 2018 EMEA 96 97 -1% 21.0% 20.9% Americas 49 45 +9% 14.4% 14.0% Asia Pacific 13 13 +0% 10.5% 10.6% 158 155 +2% 17.1% 17.0% TP ICAP plc Interim Results
Slide 20: Exceptional and acquisition related items
Exceptional and acquisition related items £m (2018 at reported exchange rates) H1 2019 H1 2018 ICAP integration costs 20 24 Amortisation of intangible assets arising on consolidation 21 20 Impairment of intangible assets arising on consolidation - 58 Net charge relating to legal settlements 2 4 Char
Slide 21: Earnings, EPS and dividends
Earnings EPS and dividends Maintenance of full year dividend throughout integration £m (2018 at reported exchange rates) H1 2019 H1 2018 Underlying Earnings 108 107 Exceptional and acquisition-related items (net of tax) (42) (94) Reported Earnings 66 13 Weighted average shares in issue 560.0m 556.3m
Slide 22: Operating cash flow
Operating cash flow Increased cash from operations H1 2019 H1 2018 £m Underlying Cash flow Underlying Cash flow Underlying Operating profit 158 155 Share based compensation and pension admin fees 3 1 Depreciation and amortisation 18 17 Depreciation of right-of-use assets 11 - EBITDA 190 173 Change i
Slide 23: Balance sheet
Balance sheet £m Jun-19 Dec-18 Goodwill & other intangibles arising on consolidation 1,635 1,663 Other non-current assets 202 197 Current assets less current and non-current liabilities 44 (117) Cash and financial investments 781 800 Pension assets / obligations (3) 52 Deferred tax liabilities (98)
Slide 24: Debt profile and refinancing
Debt profile and refinancing £m Jun-19 Dec-18 5.25% Sterling Notes June 2019 - 80 5.25% Sterling Notes January 2024 431 500 5.25% Sterling Notes May 2026 250 - Loan from related party 37 - Revolving credit facility draw down - 52 Unamortised debt issue costs (3) (2) Accrued interest 11 12 Gross Debt
Slide 25: Cash & cash equivalents and financial investments
Cash & cash equivalents and financial investments H1 2019 FY 2018 • Cash held for working capital, regulatory, liquidity and corporate purposes £21m £3m £82m £94m • Capital requirements of the regulated legal entities are generally met by net tangible assets held in cash £781m £800m • This cash is r
Slide 26: Net funds /(debt)
Net funds /(debt) Cash & cash Financial Total £m equivalents investments funds Debt Net At 31 December 2018 667 133 800 (642) 158 Reported net cash flow from operating activities (2) - (2) 1 (1) Net cash flow from investment activities (21) 2 (19) - (19) Dividends paid (63) - (63) - (63) Net repayme
Slide 27: CRD IV Compliance
CRD IV Compliance • FCA has granted TP ICAP ten year waiver from supervision under CRD IV on a consolidated basis • The Group now only has to comply with Financial Holding Company Test • Currently we have a deficit under the Consolidated Supervision Test, as Goodwill is not eligible capital under CR
Slide 28: Full year guidance
Full year guidance Refinement of IFRS 16 and broker compensation guidance Revenue for 2019 Synergies and costs to achieve Low single digit growth On track to achieve £75m of synergies by end 2019 Uncertain impact of Brexit c. £30m of cash costs to achieve Planned costs Net finance expense £15m in 20
Slide 29: Nicolas Breteau, CEO
Nicolas Breteau CEO TP ICAP plc Interim Results for the six months ended 30 June 2019 | 6 August 2019 29
Slide 30: Evolution of TP ICAP continues apace
Evolution of TP ICAP continues apace • Investing to increase the proportion of hybrid and electronic trading with additional £15m made available for six projects across the Group • Increasing diversification across the Group; non-Global Broking businesses now represent 30% of group revenue • Encoura
Slide 31: Global Broking
Global Broking Revenues H1 2019: £648m - 6% • The division gave a creditable performance against a backdrop of challenging markets • Senior management are taking action to reduce costs • Despite difficult markets, there has been good progress in developing more hybrid and electronic business in keep
Slide 32: Energy & Commodities
Energy & Commodities Revenues H1 2019: £187m + 8% • Increased revenues driven by improved conditions in power and gas markets, strategic hires and acquisition of Axiom • E&C represents an all-to-all market with considerable scope for expansion of hybrid and electronic offerings • Investment initiati
Slide 33: Institutional Services
Institutional Services Revenues H1 2019: £23m + 28% • Institutional Services provides trade ideas and agency execution to buyside clients • Offers access to best price from a wide range of sources while guaranteeing anonymity and neutrality • Initial focus on FX, listed derivatives, relative value a
Slide 34: Data & Analytics
Data & Analytics Revenues H1 2019: £64m + 12% • Data & Analytics is the leading provider of OTC pricing data • Uses data harvested from both Global Broking and Energy & Commodities; as the world’s leading interdealer broker, we have access to more data than any other market player • Demand for data
Slide 35: Strong base for the future
Strong base for the future • Good progress in creating a solid platform to deliver future growth • We start from a strong position: – Large pools of liquidity and strong relationships put us at heart of financial markets – Leading intermediary in Energy & Commodities – Building a strong agency franc
Slide 36: Questions & answers
Questions & answers TP ICAP plc Interim Results for the six months ended 30 June 2019 | 6 August 2019 36